Black Friday car deals may be hard to find: analyst
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If you’re on the hunt for a new car and hoping to score a big vacation deal, you may want to temper your expectations.
While you can find Black Friday sales and year-end specials, they’re neither plentiful nor generous this year, said Joseph Yoon, consumer insight analyst for Edmunds, an auto research and car-buying site. Add to that high car prices and high financing costs, and the buying process may be more painful than you expected.
“I think many buyers will be a little disappointed,” Yoon said.
Stocks increased but discounts decreased
Yoon also said there is plenty of stock. Buyers now have a wider selection of dealer lots to choose from, after pandemic-era supply chain disruptions and production slowdowns led to permanent shortages starting in 2021.
“After the biggest inventory crisis the market has ever seen, inventories have come back… this is especially important when it comes to reaching a deal,” Yoon said.
The average manufacturer’s suggested retail price for new cars reached $51,345 in October, according to Edmunds. This sticker price is slightly lower than September’s average of $51,434. The expiration of tax credits for electric vehicles has led to a surge in electric vehicle purchases, which is 3.9% higher than a year ago.
But according to Edmunds data, the actual price paid averaged $49,105, meaning the average discount was $2,240. While dealer incentives have slowly increased since disappearing in 2021 and 2022, with many buyers paying above sticker price due to inventory shortages, these deals still have not returned to pre-pandemic levels.
According to Edmunds, the average sticker price in December 2019 was $41,696, and the typical price paid was $38,669 after a $3,027 rebate.
Buyers who made their last car purchase years ago “may be surprised to find that both the prices and payment terms are much higher than they remember,” said certified financial planner Stephen Kates, a financial analyst for Bankrate.
Don’t shop ‘monthly payment only’
The typical monthly payment for a new car rose to $766 in October; This was up 0.4% from September and 1.2% from the previous year. Research from Cox Automotive. The average monthly payment peaked at $795 in December 2022.
At the same time, 22% of buyers are taking out loans with terms of seven years or longer, according to Edmunds. While doing so may lower the monthly payment, it also typically means a higher interest rate and paying more interest over the life of the loan.
“Consumers should be careful about purchasing based solely on monthly payments,” Kates said.
To illustrate: An eight-year loan more than doubles the total interest paid over the life of the loan compared to a four-year loan, he said.
The average interest rate on a five-year new car loan is 7.07 percent. Latest data from Bankrate. The average rate for a four-year second-hand car loan is 7.52%. However, this rate can vary greatly depending on your credit score. The lower your score, the higher the rate.
“Just three years ago rates were about two percentage points lower,” Kates said. The difference between a 5 percent and 7 percent interest rate on a $30,000 auto loan means about $336 more in interest per year, he said.
There are ways to reduce the financial pain of buying a new car. For example, cars that have been sitting in a dealer’s lot for at least a few months are likely candidates for negotiation for a better deal, Yoon said.
“Looking at cars that have been around a little longer may be the most useful tool in your toolbox,” he said.
“The perfect trio would be a car that the manufacturer has a discount on, one that has been sitting at the dealer for a long time, and one that you really like,” he said.
If you have a trade-in car that’s in good shape and pays off, it will also reduce the amount you need to finance, Yoon said. However, he said, “Don’t count on getting much for a vehicle you’ve had for 15 years and is on its last legs.”
